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SEC accuses Stiefel Laboratories of defrauding employee shareholders

Glaxosmithkline
The Securities and Exchange Commission has accused a subsidiary of GlaxoSmithKline and the subsidiary’s former chief executive of defrauding employees and other shareholders by buying back the company’s private stock at severely undervalued prices.

In a lawsuit filed in federal court in Florida, the SEC accused Stiefel Laboratories Inc. and former chairman and Chief Executive Charles Stiefel of withholding information from shareholders in order to acquire their shares at bargain prices.

Among several accusations, the SEC said Stiefel falsely told shareholders that the company would remain family-owned when he was actually negotiating the sale of the company to GlaxoSmithKline.

Amid the acquisition talks from December 2008 to April 2009, Stiefel’s company bought more than $13 million worth of stock from shareholders. When Stiefel announced it was being acquired by GlaxoSmithKline on April 20, 2009, those shares gained more than 300% in value, the SEC said.

“Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric I. Bustillo, director of the SEC’s Miami office. “Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan.”

Based in Coral Gables, Fla., Stiefel was the world’s largest private manufacturer of dermatology products before its acquisition by GlaxoSmithKline, the SEC said.

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Photo: GlaxoSmithKline factory in Puerto Rico Credit: Brennan Linsley / Associated Press

Stocks fall as European optimism fades

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One day.

That seems to be how long the optimism about Europe's new plan to deal with its financial crisis lasted.

The deal was marketed as a solution to Europe's lingering debt crisis, and after it was announced on Friday stocks rose.

But when markets opened again Monday morning, investors seemed to have thought better of their initial optimism, driving stocks prices down and yields on European bond prices up, indicating that there is still fear about lending money to some of Europe's most troubled economies.

The Dow Jones industrial average was recently down 224.02 points or 1.8%  to 11959.33. European markets closed down even more sharply, with leading indexes down 3.4% in Germany and 2.6% in France.

The big blow to confidence Monday morning was a report from Moody's credit rating agency stating that Friday's agreement did little to help the credit situation of European economies -- and that Moody's may still downgrade the credit ratings of European countries.

"The communique offers few new measures, and does not change our view that risks to the cohesion of the euro area continue to rise," the Moody's report says, referring to Friday's agreement.

Meanwhile, in Israel, Standard & Poor's chief economist expressed his own reservations about the European deal.

Friday's agreement, announced by German Chancellor Angela Merkel and others, strengthened emergency crisis funds and created new measures to ensure the fiscal discipline of European Union members. But critics questioned if the measures would be put into effect quickly enough, and if there are sufficient avenues for enforcement.

The agreement was supposed to give investors faith that Spain, Italy and other European nations would be able to pay back lenders, despite their big national debts and deficits. On Monday, though, investors fled from these bonds, driving the yield on the 10-year Italian bond up to 6.54%, from 6.33% on Friday.

"The fiscal and economic prospects of Italy and the other southern Eurozone countries remain very precarious," John Higgins, an economist with Capital Economics, wrote in a note to clients Monday. "Indeed, we think that Italy will have to go through years of severe pain if it is to reduce its public debt to a sustainable level and thrive within the region even if it is provided with years of major financial assistance."

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-- Nathaniel Popper

twitter.com/nathanielpopper

Photo: German Chancellor Angela Merkel. Credit: Michael Sohn / Associated Press

Investors greet European deal with cautious optimism

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Investors and economists are responding cautiously to a deal worked out in Brussels that is supposed to solve the European debt crisis.

The summit in Brussels was billed as the last chance to end a crisis that has wreaked havoc on the European economy for over a year.

The deal announced early Friday is designed to draw the European Union closer together fiscally, and to punish member nations that run large deficits. But important details of the deal have not been worked out and a number of European Union members, including Great Britain, have not signed on.

"The fiscal language looks to be copied and pasted from the original Stability and Growth Pact with a few bells and whistles added to imply that 'this time we mean it,'''  Citigroup strategist Steven Englander wrote in a note to clients.

The deal has been enough to send stocks up modestly Friday morning, but investors are not signaling that they see an immediate end to the troubles in Europe. The Dow Jones industrial average was up 154.32, or 1.29%, to 12,105.90 in early trading. Leading indexes were up 1.8% in Germany and 2.1% in France.

Much of the attention now turns to the European Central Bank and its president, Mario Draghi, who has been cautious about committing the bank's resources to helping prop up the continent's weaker economies. Draghi greeted the deal with careful optimism.

"It's going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members," Draghi said. "We came to conclusions that will have to be fleshed out more in the coming days."

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-- Nathaniel Popper

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Photo: France's President Nicolas Sarkozy, left, talks with Germany's Chancellor Angela Merkel  and European Commission President Jose Manuel Barroso at a European Union summit in Brussels on Friday. Credit: Yves Herman / Reuters

Anxious investors watching and waiting for Europe

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In a quiet before the storm, investors have been sitting on their hands waiting for a European summit Friday that some commentators say is a do-or-die moment for the European economy.

European Union leaders will meet in Brussels to consider a plan put together by German and French leaders aimed at integrating the continent's finances more fully.

There is hope that the plan can finally resolve the debt crisis that has been roiling the European economy for more than a year. After a number of piecemeal solutions have failed to stop the spread of the crisis, many economists say that a large-scale change in the structure of the European Union provides the only possible solution. As the meetings approach, each rumor out of one of the European camps has had the ability to shake investors.

"It’s extremely hard to keep up at the moment and extremely hard to analyse as even if ideas never see the light of day their mere discussion seems to have the ability to move markets," said Jim Reid, a strategist at Deutsche Bank.

The latest such comment to cause waves came from a German politician, who told reporters hours ago he was skeptical that leaders would be able to reach a deal.

"I have to say today, on Wednesday, that I am more pessimistic than last week about reaching an overall deal," Reuters reported the anonymous official as saying. "My pessimism stems from the overall picture that I see at this point, in which institutions and member states will have to move on many points to make possible the new treaty rules that we are aiming for."

These comments helped send European markets down at the end of the day, and American markets down at the beginning -- though they quickly headed back up and began wobbling again. The Standard & Poor's 500 was recently down 1.4 points or 0.1% to 1,257.06, while the Dow Jones industrial average was up 25.80 or 0.2% to 12,175.93.

Leading indexes ended the day down 0.6% in Germany and 0.1% in France.

In addition to the EU meeting Friday, the European Central Bank will be meeting Thursday to consider steps they might take to help the situation. But while the bank could lower interest rates to help boost the economy, officials have said that they will not pull out their big guns until a more comprehensive fiscal agreement is reached.

"The bank looks set to announce at least some further action soon (perhaps next week) but the idea that it is about to fire a 'silver bullet' right into the heart of the debt crisis still looks very optimistic," said John Higgins, an economist at Capital Economics.

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Photo: A trader on the floor of the New York Stock Exchange. Credit: Justin Lane / European Pressphoto Agency

SEC enforcement chief defends agency

Khuzami-Jacquelyn Martin-AssociatedPress

The head of the Securities and Exchange Commission's enforcement unit doesn't take kindly to criticism, even if it's from a federal judge.

In sharply worded remarks Thursday, SEC enforcement chief Robert Khuzami praised the agency's track record in cracking down on Wall Street fraud -- and defended a controversial SEC policy of settling cases against alleged Wall Street malefactors without forcing them to admit guilt.

SEC settlements normally include boilerplate language saying companies neither admit nor deny whatever the agency has accused them of. Companies want to avoid admissions of guilt for several reasons, including fear that they would be vulnerable to lawsuits from aggrieved investors.

U.S. District Judge Jed Rakoff created a firestorm this week when he rejected a proposed $285-million SEC settlement with Citigroup Inc. over a mortgage-bond deal. The judge upbraided the SEC for routinely settling cases without requiring acknowledgements of wrongdoing.

The proposed settlement was "neither fair, nor reasonable, nor adequate, nor in the public interest," Rakoff said.

Khuzami shot back at Rakoff and others in a speech at a conference in Washington.

SEC naysayers suffer from fundamental "misunderstandings" about how the SEC works and what powers it does -- and does not -- have, he said.

Companies would never admit blame, he said, and pushing them to do so would only prolong legal battles, delay recompense to fraud victims and overwhelm the agency's limited resources.

Federal judges have approved admission-free settlements "time and time again," he said.

"While it is easy to criticize from the sidelines, the practical reality is that many companies would refuse to settle cases if they are required to admit unlawful conduct because that might expose them to additional lawsuits by litigants seeking damages," Khuzami said.

"The result would be longer delays before victims get compensated, the expenditure of SEC resources that could be spent stopping the next fraud, and -– quite possibly -– less money in the pockets of wronged investors," Khuzami said. "And we’d lose the certainty that the victims would actually get compensation."

The SEC, Khuzami said, has had "impressive results" in cracking down on Wall Street malfeasance in the aftermath of the global financial crisis.

The agency brought 735 enforcement actions in fiscal 2011, nearly 9% more than the previous year and the most in SEC history, he said.

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Photo: Robert Khuzami, enforcement chief at the Securities and Enforcement Commission. Credit: Jacquelyn Martin / Associated Press

Jacquelyn Martin / Associated Press. 

Bond yields tumble in Europe as crisis fears ease

Draghi
Europe continued to pull back from the brink Thursday as government bond yields fell for a fourth day in France, Italy, Spain and other countries.

The drop in yields followed a move by six major world central banks on Wednesday to pump more money into the global financial system, a strategy aimed particularly at assisting cash-strapped European banks.

Bond buyers also got gutsier as European Central Bank President Mario Draghi hinted that the ECB could take more aggressive action to help ease the continent’s debt crisis -- if countries pledge to keep spending in check.

The ECB has been under enormous pressure to boost its purchases of Eurozone bonds as a way to push yields down, after many investors abandoned the debt market in recent months amid fears of a wave of sovereign defaults.

But investors showed a renewed appetite for European debt Thursday as France and Spain successfully sold new bonds.

In debt trading, the market yield on two-year French bonds slid to 1.13%, down from 1.29% on Wednesday and a recent high of 1.90% a week ago.

Spanish two-year bond yields tumbled to 4.78% from 5.37% on Wednesday and 6.09% a week ago.

The euro currency continued to edge up, rising 0.2% to $1.347. The euro hit an eight-week low of $1.324 last week.

European stock markets ended modestly lower after Wednesday’s big gains. The German market fell 0.9% after surging 5% on Wednesday. The French market eased 0.8%, Italian stocks slipped 0.2% and the Spanish market was off 0.3%.

Wall Street was largely flat at about 11:30 a.m. PST. The Dow Jones industrial average was off 13 points to 12,031 after rocketing 490 points, or 4.2% in Wednesday’s global rally.

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Photo: European Central Bank President Mario Draghi. Credit: Jock Fistick / Bloomberg News


A third straight annual gain for stocks? Just maybe . . .

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Wednesday's big rally on Wall Street puts the stock market back within striking distance of posting a gain for 2011 -- if the bulls can stay in control in December.

That's a big "if," of course, given the still-dangerous situation in Europe.

But the U.S. market’s relative resilience in November, compared with most foreign markets, hinted that many investors were reluctant to bail out of American equities despite Europe's woes.

Looking solely at U.S. economic data for the month, stock investors had a decent reason to stay put: Most of the reports showed the recovery continuing, although at a modest pace.

That was reinforced by data Wednesday on Chicago-area manufacturing, private-sector payroll growth and the Federal Reserve’s latest “beige book” report on U.S. economic conditions.

Those reports, along with the Fed’s surprise move with other major central banks to try to bolster Europe’s struggling banking system, drove the Dow Jones industrial average up 490 points, or 4.2%, to 12,045.68.

That lifted the Dow back into the black for 2011. The 30-stock index is up 4% for the year as November ends.

But most broader indexes still are in the red. The Standard & Poor’s 500 is down 0.8% for the year. The Nasdaq composite is down 1.2%, and the Russell 2,000 small-stock index is off 5.9%.

If the market continues to advance it could put more pressure on hedge fund managers and other big-money players to hop aboard, hoping to salvage their performance for 2011. They also know that December historically has been a good month for the market.

Just by the math, U.S. stocks should have an easier time finishing the year with gains compared with most foreign markets.

The average European blue-chip stock is down 16.6% this year. The Japanese market is down 17.5%, Brazilian stocks are off 17.9% and the Canadian market is down 9.2%.

If Wall Street can rally in December, major stock indexes could post their third-straight annual gain.

The Dow industrials rose 11% in 2010 after an 18.8% jump in 2009. Those gains followed the 33.8% crash in 2008.

The S&P 500 index was up 12.8% last year after a 23.4% advance in 2009. The S&P plunged 38.5% in 2008.

The Russell 2,000 index will have a harder time getting close to its gains of 2009 and 2010. It was up 25% in both of those years after tumbling 34.8% in 2008.

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Photo: On the New York Stock Exchange floor Wednesday. Credit: Justin Lane / EPA

Dow ends best day since March 2009

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The Dow Jones industrial average had its best day since March 2009 thanks to a quick succession of promising economic reports, including a new effort by central banks to help struggling European economies.

The Dow closed up 490.05 points, or 4.2%, to 12,045.68. It was the largest point and percentage advance since March 23, 2009, when the index shot up 497 points, or 6.8% -- just as the latest bull market was beginning.

Most broader indexes, however, posted their biggest one-day gains since early August, when markets were bouncing wildly from day to day after Standard & Poor’s downgrade of the U.S. government’s credit rating.

The S& P 500 index surged 4.3% to 1,246.96, its best day since it rose 4.6% on Aug. 11. The Nasdaq composite index jumped 4.2% to 2,620.34, its best day since Aug. 23, when it rallied 4.3%.

The gains lifted most indexes back to where they were two weeks ago, before Europe’s worsening debt crisis triggered steep declines.

The Dow is back in the black year to date, up 4%. Most U.S. indexes, however, still are down for the year.

"There's just a lot of good news in general," said Don Hays, the founder of Hays Advisory. 

U.S. stock indexes rose steadily during the last hour of trading, but most of the increases came at the beginning of the day because of news reported before markets opened.

It began last night when China said that it would lower the amount of money that banks have to hold in reserve. This should help stimulate the economy by making banks more willing to lend.

Before U.S. markets opened, the Federal Reserve, the European Central Bank and four other central banks unveiled a new program to increase access to dollars for struggling European banks. The move is designed to make it easier for European banks to access funds at a time when fears about the European debt crisis have led to a freeze in liquidity.

In the United States, the payroll company ADP said just before the markets opened that private-sector companies in the U.S. had added 206,000 employees in November. That is almost 100,000 more than they added in October and nearly 100,000 more than analysts had expected. The figures allay fears that the job market has ground to a halt.

Later in the day, data on business activity, pending home sales and general economic growth all came in better than expected.

"There were a range of different indicators on different parts of the U.S. economy, and they all did well," said Paul Ashworth, an economist with Capital Economics.

Markets rose for the third straight day after more than a week of big declines.

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Stocks surge thanks to good news on jobs, Europe and China

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Stock markets surged around the world thanks to a quick succession of promising economic news announcements, including a new effort by central banks to help struggling European economies.

The Dow Jones industrial average rose 390.76, or 3.4% to 11,946.39 immediately after the opening bell. Leading indexes were up 4.2% in Germany and 3.3% in France.

"The financial markets have been treated to a raft of constructive news since late last night," Steve Ricchiuto, the chief U.S. economist for Mizuho Securities, wrote in a note to clients Tuesday morning.

The good news began flowing in last night when China announced that it would lower the amount of money that banks have to hold in reserve. This should help stimulate the economy by making banks more willing to lend.

As European markets opened, the Federal Reserve, the European Central Bank and three other central banks unveiled a new program to increase access to dollars for struggling European banks. The move is designed to make it easier for European banks to access funds at a time when fears about the European debt crisis have led to a freeze in liquidity.

Finally, in the United States, the payroll company ADP said just before markets opened that private sector companies in the U.S. had added 206,000 new employees in November. That is almost 100,000 more than they added in October, and also nearly 100,000 more than analysts had expected. The figures allay fears that the job market has ground to a halt. It also suggests that the rise in consumer spending seen over the Thanksgiving weekend may continue.

"Better labor market conditions, combined with the reported jump in consumer confidence in November is the likely driver behind retailer reports of a strong start to the holiday shopping season," economists from Nomura Global Economics wrote to clients.

Markets are rising for the second straight day after over a week of big declines. The Standard & Poor's 500 index was recently up 3.3%, or 39.67 points, to 1,234.86.

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Facebook may do an IPO in the second quarter

Facebook
Facebook Inc. may be closing in on an initial public stock offering.

The granddaddy of social-media companies is considering an IPO sometime in the second quarter of next year, although the exact timing has not yet been determined, the Wall Street Journal reported.

The company reportedly is contemplating a $10-billion offering that would value the company at $100 billion.

Investors have anxiously awaited a chance to buy into the fast-growing technology goliath following a string of IPOs this year from smaller social-media companies.

The timing of Facebook's IPO is likely to hinge in part on the condition of the stock market, which has not been kind lately to some other prominent tech IPOs.

In a major disappointment, shares of one of this year's most closely watched IPOs, online-coupon company Groupon Inc., have plunged recently. The stock closed Monday at $15.24, far below the $20 price at which it sold shares to investors earlier this month.

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Holiday sales help push up stock market

NYSE4-SpencerPlatt-Getty Images
The stock market finally has something to be thankful for, as stocks surged from the opening bell thanks to excitement over revved-up holiday shopping and the latest plan to contain Europe’s debt crisis.

After sagging nearly 1,000 points this month, the Dow Jones industrial average rose 291.23 points, or 2.6%, to 11,523.01. The Standard & Poor’s 500 index jumped 33.88 points, or 2.9%, to 1,192.55. It was the best day for each index in a month.

Global markets got a boost from news that Germany and France are drawing up plans that would commit European Union members to greater fiscal unity. That raised hope that European leaders may address an underlying cause of the continent’s financial problems: the absence of a workable mechanism that would force individual countries in the 17-nation Eurozone to exercise strict budgetary discipline.

Share prices surged through Europe, with Germany’s benchmark stock index jumping 4.6% and France’s leaping 5.5%.

Investors also were buoyed by reports pointing to strong consumer spending over the closely watched Black Friday shopping weekend.

Shoppers shelled out a total $52.4 billion from Thanksgiving Day through Sunday, a 16.4% surge from $45 billion last year, according to the National Retail Federation. Each shopper on average spent $398.62, a 9.1% bump from last year, and more were willing to buy gifts for themselves on top of presents for family and friends.

Still, it remains to be seen whether the market rebound lasts longer than a day or two.

“Short covering” may have helped to stoke the rally, as traders who had borrowed stock and sold it, betting on further declines, closed out their bets once the market turned up.

Stocks have repeatedly surged in recent months on reports of progress in Europe, only to falter again when investors studied the details and concluded that there was no immediate solution to the debt overhang in many countries.

And some skeptics worry that the encouraging start to holiday shopping could peter out if it's shown that some consumers simply front-loaded their shopping, thus sapping sales from later in the season.

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-- Walter Hamilton, Nathaniel Popper, Shan Li and Tom Petruno

Photo: The American flag flying at the New York Stock Exchange. Credit: Spencer Platt / Getty Images

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